Your Right to Know

The Ohio Senate is expected to vote today to expand the moratorium on opening new Internet cafes
in Ohio, while the attorney general filed lawsuits against three cafes that appeared to open after
the prior moratorium took effect in June 2012.

The cafes, located in Van Wert, Fulton and Mahoning counties, allegedly did not register with
the state, as required.

Attorney General MikeDeWine has been among the most vocal state leaders advocating for the
elimination of Internet cafes, which critics say are largely unregulated, illegal gambling
operations across the state.

Senate GOP leaders changed course last week and announced they would move aggressively to pass a
bill in May to ban the more than 630 Internet cafes operating in Ohio. The House already has
approved the legislation, limiting prize payouts to $10, which would effectively shut down the
businesses.

Franklin County Prosecutor Ron O’Brien told a Senate panel yesterday that the cafes, or
sweepstakes parlors, investigated in the Columbus area were operating illegal gambling businesses
with video poker and other games of chance. Broader investigations would be a severe drain on his
office and law enforcement, he said.

“The Internet time and phone cards are just a ruse,” he said, referring to the products that the
cafes sell in exchange for the chance to win cash prizes.

Last week, Cuyahoga County Prosecutor Timothy McGinty sent a letter to his area police chiefs,
saying “these mini-casinos are nothing more than organized crime and havens for systematic, ongoing
illegal gambling operations.”

The letter followed a raid by DeWine, the Ohio Investigative Unit and other law-enforcement
agencies on six Cleveland-area sweepstakes parlors and the New Jersey headquarters of a
sweepstakes-software provider, VS2 Worldwide Communications.

The Internet cafe industry says lawmakers should focus on the “rogue operators” rather than
shutting down everyone.

“There are good, hardworking small-business owners who are conducting legitimate sweepstakes in
Ohio,” said Sam Ferruccio, legal counsel for Pong Marketing and Promotions, in a statement. The
Ontario, Canada, company provides software to cafe owners.

Sen. Bill Coley, R-West Chester, pressed O’Brien on why more effort is not made to collect taxes
from the nearly 40 cafes operating in Franklin County.

“The legislature made no exemption under the sales tax for this. I would think that would have
people’s attention,” he said. “No one seems to want to enforce existing law.”

O’Brien questioned whether the resources were available to collect those taxes, and said he has
no confidence that the financial information provided by the cafes is accurate, though one appeared
to bring in about $50,000 a month. He said he has found indications of skimming cash proceeds and
money laundering.

Sen. Bill Sykes, R-Cincinnati, said some of the same people who were shut down when lawmakers
passed the skill-games ban in 2007 are now operating Internet cafes.

Whatever lawmakers pass, O’Brien said, artful lawyers will try to get around it, especially when
so much money is at stake.

“I don’t think House Bill 7 will be the be-all, end-all,” he said. “But I don’t think that’s a
reason to ignore what we have with Internet cafes now.”